Examines the underpricing of initial public offerings (IPOs) and the impact of this underpricing on investor uncertainty and on the investment bankers who take the firms public. The firms going public lack the credibility to assert that the offering price is below the expected market price...

This chapter analyzes the securities issuance process, focusing on initial public offerings (IPOs) and seasoned equity offerings (SEOs). The IPO literature documents three empirical patterns: 1) short-run underpricing; 2) long-run underperformance (although this is contentious); and 3) extreme...